Chancellor Rachel Reeves has set out the first Labour Budget since 2010 which will increase taxes by £40bn amid a pledge to "fix the foundations" of the economy, declaring: "This is a moment of fundamental choice for Britain. I have made my choices. The responsible choices."
Here are the main points from the Chancellor’s Budget:
The Chancellor has raised taxes by £40bn. “Any chancellor standing here today would face this reality, and any responsible chancellor would take action,” she said.
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Among measures are a 1.2% increase for employers’ National Insurance contributions to 15% in April 2025. The threshold for paying them will fall from £9,100 per year to £5,000.
The headline rates of capital gains tax will increase, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%.
The stamp duty land tax surcharge for second homes will increase by two percentage points to 5%, and will come into effect from Thursday, the Chancellor added.
Changes to inheritance tax includes bringing pension pots within the tax from April 2027 and reforms to agricultural and business property reliefs, raising a total of £2 billion a year.
On personal taxes, the Government will not extend the freeze on income tax and national insurance thresholds beyond 2027/28, saying it would “hurt working people” to keep thresholds frozen.
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National insurance, VAT or income tax will not increase for working people in this Budget.
The national minimum wage will rise by 6.7% to £12.21 an hour after asking the Low Pay Commission to take the “cost of living” into account. The Government will move to a single level of the minimum wage, the Chancellor said, which will mean a flat rate for those 18 and above.
A “flat rate duty” on vaping liquid will be introduced from October 2026. Taxes will also increase on tobacco. Meanwhile draught duty on alcoholic drinks will fall by 1.7%, meaning “a penny off a pint in the pub”.
The 5p cut to fuel duty will be kept into next year, with Ms Reeves saying it would be the “wrong choice” to increase it. She said keeping the cut and freezing it again will cost £3 billion.
HS2 will be brought to Euston Station in London, Ms Reeves confirmed. She said she would commit “the funding required” to begin tunnelling work.
Rail links will be upgraded between York, Leeds, Huddersfield and Manchester.
The Government will invest more than £5 billion in housebuilding, and £1 billion of funding to remove dangerous cladding next year.
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Ms Reeves said she is setting a “2% productivity, efficiency and savings target” for all Government departments next year.
The Government hopes to raise £6.5bn by giving HMRC new technology and hiring extra staff to crack down on £6.5bn in unpaid taxes.
Regions in Scotland and Northern Ireland will get new growth deals, and devolved nations will get the largest real-terms funding amount since devolution. Scotland will get an extra £3.4bn, Wales will get £1.7bn, and £1.5bn for Stormont in Northern Ireland.
On inflation, ministers will maintain the MPC’s (Bank of England’s Monetary Policy Committee) target of 2%, as measured by the 12-month increase in the Consumer Prices Index.
Ms Reeves said the OBR has forecast that CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029.
The Chancellor said Government borrowing for this year is expected to reach £127bn.
Public sector net borrowing will be £105.6bn in 2025-26 and drop each year to £70.6 billion in 2029-30.
She added the current budget will be in deficit by £26.2bn in 2025-26 and £5.2bn in 2026-27, before moving into surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30, meeting the Government’s “stability rule” two years early.